an online exchange in way to transfer value online and eighty percent of bitcoins are traded on mt gox now mt gox stands for magic the gathering online exchange it started life as a place where you could exchange magic the gathering cards for cash and it ended up not by design obviously but it became the place to go to trade bitcoins as well but william has created a backstage look at what the mt gox commando looks like as you see it looks very nine hundred fifty s. now max you created the hollywood stock exchange where it's run by the virtual specialist technology which you invented and a few days before mt gox crashed. you warned exactly of this so explain what is wrong with the market making function here the way trades are processed the buyers in the sellers at mt gox and all these other exchanges it's not done in

a way that's commensurate let's say with the way trades are cleared and exchange the new york stock exchange or some other exchange where there is a specialist function who is making a market and their job is to create a fair and orderly price matching buys and sells and so they do this by by having both the ability to match trades buyers and sellers but also managing an inventory of whatever it is they're trading in so if it's i.b.m. stock on the floor of the new york stock exchange the market maker would have an inventory of i.b.m. stock so that if in fact there was a mismatch of buyers and sellers they can step in and be the market be the market maker that doesn't exist on any of these exchanges really they're trying to match up buyers and sellers in a way that's completely inappropriate for any kind of modern market making mechanism and so while i'm in the process now of trying to straighten that out by

working by consulting with projects here in london and elsewhere to see if we can bring in a world class market making and of course my patent on this the virtual specialist the designs of that patent which were go back to the one nine hundred ninety s. there's been a lot of improved ideas that have come along sense then that i'm hoping to bring to the to the party what would mt gox look like with a proper market making function if it were actually matching buyers and sellers right now their hands off it just comes as orders come in it clears those orders even if it's point there is there is there one bitcoin it goes into the same queue as somebody trying to place an order for a thousand bitcoins so first of all there's only only one security and that's because on but there's multiple exchanges trying to. but be exchanges buyers and sellers of big going tonight have different price discovery spread out over different exchanges and they're all inadequate so you have this incredible spread

on different prices on different exchanges so that's problem number one the good news is that there's only one security or that you need to make a marketing but there needs to be one at least one functioning market that's able to take buys and sells and create that what it would look like mt gox you'd be able to for example put in market orders for bitcoin at a fair and orderly price that would be at or near what is the market for for bitcoin right now you have a lot of people putting in a limit orders they want to buy and sell at a certain price and these are lined up and they're trying to match these limit orders against each other there is no real good way to buy and sell at the market or market orders and if you don't have a market of water and this was the innovation i brought to the virtual specialist technology back in the one nine hundred ninety s. it's how to create a market order on an exchange with a virtual security using a virtual currency which was the basis then for hollywood stock exchange it was a basis for what became known as the prediction market industry which pretty much is built on my technologies built on my concepts of what you can do with a virtual currency in a virtual market and so indeed to bring some of that over to this space to make

a market but as you point out as i've said all along the mining of big coins under soto she nakamoto that's the genesis creation of the bitcoins that's brilliant and it's fantastic and at the block chain itself of bitcoin creation is unimpeachable and there's nothing wrong with that then there's the wallet technology which is to some degree being proven to be a little bit less than robust then there's the merchant side of the business that seems to be doing the best you know people who are actually in the business of facilitating merchandising are doing quite well but then the exchange piece of the coin ecosystem as i've been saying all along is the weakest link in the chain because you have people who are trying to adapt magic card trading systems for multibillion dollar exchange. platforms and they're not up to the task however the success of bitcoin itself as mt gox says that they were signing up eighty thousand

new registrants and march for sixty thousand sorry and now they're doing twenty thousand new registrants a day so this is a booming market but see n.b.c. after this crash did contact you and it resulted in the headline big coin crash spurs race to create new exchanges so there's a lot of former guys like you who were. still a guy but guys who were formerly market makers or creators and exchanges so whether it's the rumor is cantor fitzgerald is coming up with an exchange this is a rumor we have heard exclusive here that they're going to introduce your technology to the big queen space there's a new site called open queen which is trading bitcoin but also ripple another mass backed currency and we talked about that here two years ago with david hales but the guy behind that is the guy behind the p.d.p.

lending facility i think prosper so there are guys who have built big companies making markets and prices and price discovery who know what they're doing rather than this like gaming center here i think for people to understand where we are on the chronological progression the timeline of bitcoins acceptance and use as mainstream currency and challenge to currencies you have to understand that right now the technology of bitcoin is what i would say pre netscape if you remember netscape went public in the early one nine hundred ninety s. and before then there was no browser really that people were using on the internet there was no way to just jump onto a browser and start surfing the web it was done in a way that was extremely user unfriendly then you had a net. scaping netscape went public and then you had google and you had the big day and you had this whole phenomenon known as the internet but it's based on that

browser technology right now there is no similar ease of use technology then people will be buying and selling because engine will not and the moment ever think about the block chain or so toshi or cryptology they'll never crossed our mind they're just be buying and selling but going but so this is the mad dash for to be taking advantage of what is going to be a multi hundred billion multi-trillion dollar market so the internet before netscape was when paul krugman said the internet is just a fad it will never be bigger and more important to the economy and the fax machine and looking at it then that the ugly beast it was that only richard stallman could figure out how do you think that by the way when we've seen richard stallman use the internet he doesn't use it like you do but call krugman has also weighed in on bitcoin with similar opinion right well you'd expect that because these guys are their indicators of of a market in

a way that you'd have to interpret their words as a good reason to do the exact opposite so he's a guy who is he's just he's on the payroll of the of an academic system and the new york times to produce columns that old blue haired ladies a sense of comfort on their park avenue apartments they has no relevancy to actual day to day workings of technology the economy currencies is a complete bimbo in the second half we do talk to tony clippy of bit pay who was here last wednesday he was in town from atlanta and so we did talk to him before the mt gox crash but you know on the merchant side he's signing up merchants right left and center for a merchant which i've been on pirate my film and i've also used pay pal the. ease of use is just dramatically different for merchants anybody selling something it's much easier and there are those out there who are saying well you know what can you

do you know you can't buy anything but mozzie metals who we were you know when we were with tony gloopy that night when mt gox was crashing he was saying that the metals where you could use your bitcoin to buy gold and silver they had their record volume that day people were trading their bitcoin for gold and silver immediate cash for cash won't but it is an example of a service that's easy to use and people are sticking that you know used to it going to be paid to merchandise for the merchants to use and they are able to do it on my side pirate my film dot com we've been we've we've financed twenty films using big coin and pay so that's the only crowdfunding site out there that uses bitcoin pay is processing five million dollars a month but again it's still in the infancy this whole new network protocol this new virtual currency in peer to peer currency and you know i want to compare it to a story that was going on at the same exact time the same day as mt gox i n g again

targeted in d.d. o. s. attack i n g bank customers were again unable to use online banking services on tuesday night because of a renewed cyber attack this was a week after they were left in chaos for a whole week because they were being attacked but here's one bank in the netherlands the euro didn't crash the economy didn't crash because of course there are other banks and other ways of getting cash the banks are suffering exactly the same problems as because of the suffering the economies are suffering from the exact problems in the dollar or the yen of the euro are being debased or fooled around with their confiscated by various governments so i think the big point is a good proxy to understand how chaotic the global finance is just because paul krugman comes out of the coma says that there's nothing to worry about because the . us dollar is manipulated managed by the central banking system even though that causing massive austerity and poverty around the world doesn't mean that these currencies are not in

a state of crises bitcoin is the proxy for how screwed up these other currencies are you want to know get a true price signal of how screwed up the global economy is don't look at the dollar don't look at the dow jones look at bitcoin this is this is what is telling you how screwed up the rest of the world economy is and again you know it is a network protocol and as adoption of the technology spreads you were talking about your days being an internet space in one nine hundred ninety four is a lot different from what it is now it was a lot more expensive and time consuming then but now it's much easier i want to look at this chart consumption spreads faster today and this is from the new york times and as you see you know the telephone took from one thousand eight hundred all the way to nine hundred seventy five before it hit ninety percent of the population clothes dryer all the way over there on the left from one thousand twenty it took up to two thousand to get to eighty percent the automobile stove all started there on the left old technologies but took a long time to get one hundred percent and then as you see on the right you know that the we've gets closer and closer jampacked closer and closer as the internet

telephone fax v.c.r. was that he looks like a bubble it goes back to my idea that i came up with twenty five years ago about the lunar dollar which would be a currency traded on the dark side of the moon that would be based in units of time and would allow you to buy and sell your way through time backwards and forwards i mean that's what i thought you could come up with i think big days and interesting staging platform to be come into the little dollar protocol which i'm working on now in my imagination you do you know there is an iranian scientist who says he's invented something that could take you eight years in the future perhaps you and i don't get credit i never get credit for these things people just rip me off you know it's terrible and just give me credit if you're going to let me off you have a credit crises here we're thank so much for being on the kaiser report thank you max. so what if i could have a talk about telling the lobby bit pay dot com. by

conflict. has changed. islamic nation that i had a peaceful life the stone islam the first of those secular laws second. session. was in place and. traditions still. cannot go on the catwalk in a swimsuit it's. just a republican country. it's a. good

laboratory. to build the world's most sophisticated robots which fortunately doesn't give a darn about anything turns mission to teach creation why it should care about humans and. this is why you should care only. international and in the very heart of moscow.

welcome back to the kaiser report i'm max kaiser time now to turn to tony lippy bit today tony welcome to the kaiser report thanks max nice to see you again haven't seen you since prague i know and that was the beginning of the bit pay big korean kind of phenomenon a few years ago when i was just really a crypto punk currency but now it's mainstream is it's definitely come a long way now a year in the biz a bit pe so this is part of the business that's in the transactions side of the business the bit coin ecosystem has a number of different you know moving parts you're in the transaction business i guess you could one could say are similar to pay pal in that sense correct somewhat the merchant side of pay pal you know we don't offer any consumer services but what we do is we make it easy for businesses to accept bitcoin as a form of payment i would imagine there's a lot of demand for it there is you know there is a lot of pain out there today and businesses trying to collect payments especially if you're trying to collect a payment over the internet and you're trying to sell

a high ticket item you know it's very risky today what bitcoin allows a business to do is accept a payment over the internet from any country on the planet with nearly no risk of fraud and no other payment processor and payment network can do that today so the value proposition is there but it works completely differently than paper and credit cards and everything else so none of the existing software the business is how will process. so that's why we got to work about two years ago in creating a new platform and a new interface that would allow businesses to accept big corn as a form of payment ok so if somebody says big coin is a bank lists currency is that true oh well it's you you are storing your money in the cloud because it is money in the cloud and like everything else that's moving to the cloud you can access it from any computer anywhere in the world at any time and you can do whatever the heck you want with it you know because it is the only kind of money that you can do that with ok so the answer though is that it is without banks well you're going to be yeah you don't need a bank you're trusting your peers you're trusting the millions of people who are

already missing it was also that reason is a bit of a controversy because people think that they need banks they think they need turned back by banks and a central bank with the name of a country on it and this is a challenge and they say well it's like p.d.p. torrence the challenge the music industry this is really challenging the whole banking infrastructure but i want to go back to kind of a philosophical question you know we've had chats before in the past to kind of the bigger philosophy of bitcoin but i think people as particularly writers like felix salmon and reuters and others they look at it they're trying to evaluate it as a commodity or they're trying to look at it in terms of just a currency and they're trying to apply economic arguments to it but i think everyone misses the point that the first the place to start was when you talk about bitcoin is that something called a bit coin protocol which is a network protocol yes and that's something everyone seems to be missing talk about it sure so the value of the network is that individual nodes can transact with each other without going through a central bank or

a central clearing that is the fundamental computer science innovation behind bitcoin ok so for example in that you've got t.t.p. you've got ip you've got ethernet these are all network protocols so nakamoto pseudonymous founder could be one guy could be a group of guys they took that concept of the network protocol and they plotted to . currency to money yeah and it really it's not a true currency it's not a true commodity it's almost a new asset class right it is not defined by what we know i think that's an important point because i know here in london we're building now on having can sconce alterations with the funds that look are looking at it as an asset class that they need exposure to because the economy is fundamentally changing in a big way so let's talk about the recent comments from fin sandwich this is a regulatory body in the us they have a ruling. which i guess the broad description of this ruling would be that big

coin would fall under roughly jurisdictional concerns relating to money laundering etc it's only when the feds are involved there is good or bad what you think well it's good first of all it's just guidance it's not a ruling but it basically says that coins are money which is something that we've been proposing for several years now and which is good so at least they have come along to agree with their argument but you know what it says is that if you have a certain type of activity like if you do remittance or payroll or some type of a money transfer activity money transmission activity the same rule should apply whether you use dollars or big corn or anything else right so the rules should be applied to big big point is now considered money but clearly it's starting to get on the radar but it also shows that they don't quite understand it you know big or in the cloud it's an accounting ledger in the cloud and you're not actually transporting anything even if i were to send ubiquitous right now i'm not sending you any type of a file or an attachment i'm moving money from my account in the cloud to your

account in the cloud and that accounting ledger is stored on you know tens of thousands of computers around the world how many companies are in the periphery of this two point five billion dollars bitcoin valuation you're in a company or in a start up your own bit pay your debt lana ga you're hiring people you're part of the new economy how many other startups are out there approximately there's dozens . they're doing wallets they're doing exchanges they're doing merchant services there they're creating stores where people can spend their bitcoins right because now you have people who are early investors that are now between millionaires they really want to sell there because they want to start buying properties and cars and other items you know for their lifestyle they want to just trade their big corns for those items it's a point is that they're not hoarding bitcoin so much as they looking for something to buy with that call and show me something i want yeah and they'll spend it show me a car show me they have savings you know they have independence they're economically free absolute they're rich and they can go anywhere in the world and access their money anytime and do whatever the heck they want with what about now there seems to

be you know economically speaking at first of course the keynesians out there don't like it because they have they're into money printing and central planning so ok forget them they're not into it then you've got the i would say the libertarians and the so-called austrian school you know they're more about honest money or true money or gold and silver is money but within the austrian school there seems to be a split and you've got some within the school that are you know bitcoin fulfills carl mangas definition of money and therefore it's austria and it's good and then there are some people that are saying no it's not ok so smiling so you wear this argument not to get too philosophical here but throw some come of this brewing controversy if you can well i think maybe let's just take a simple example of somebody who's into gold they see gold as a safe haven it is the only true hard currency of the world has been for thousands of years. that's very true gold is

a last resort where all else will will follow down to in the pyramid but right now you know it's not very easy to transport gold did you see the guy who had a million dollars worth of millions of dollars worth of his car and got busted at the border and that he is in if he had used he would have had he understand that you know it has portability yes it's good but on the ok portability fungibility a durable a that's all good words where there seems to be a question is a. transit value people say gold has intrinsic value i can make jewelry out of it i can see it because it has no intrinsic value i think that does but year the master of the bit coin world tell us well i think you have to look at what gives any type of money value you know we started with gold then we went to paper money paper money was more convenient to carry around a more convenient to make change that is backed by gold backed by gold and then we went to digital money like digital dollars right centrally issued digital currencies that are linked to gold and linked to paper dollars at least initially until we went off the gold standard so everything was kind of linked to something else right now where money is linked to debt. bitcoin is now just pure information

and so it gives any type of money value is how useful is it as money you know a gold coin is worth so much but if you've got to pay somebody in germany right now that gold coin is not going to do you a lot of good in that case you know money in a bank account might be useful to you know what is any type of money value including because it is its utility as money what can you do with it and now that you have a global network an accounting ledger in the cloud and peers to peer peer to peer you know that's what gives because it's value it's the network and it's what you can do with ok it's useful but getting back to the intrinsic value discussion argument a little bit more the. there is an intrinsic value to bitcoin that has to do with its value as crypt a logical expression of cryptology that in other words the mining process which is at the heart of creating these coins you know you're mining the code face of the cyber digital world you know so to speak where you're extracting these extraordinarily large prime numbers using the network harnessed the network in

a way that's the biggest distributed in computer project in the history of the world and you're extract in these huge prime numbers a way to extract the gold nugget and then that's distributed to the network which is then the economy so that's that has intrinsic value these numbers have intrinsic value yes you know and one of the things that any payment network has to have as a data center right visa has one american express as well. with a completely distributed peer to peer currency where you put the data center and that's where the mining comes into play right any individual can contribute their computing power to being part of the data center and there they are rewarded with the newly issued bitcoins and it's a lottery system so the more people that are doing it right the less likely that you are to win and people pull together so if you use a proof of work algorithm and there's one common thing that if the majority of the network agrees on one version of history then that's the one that everybody builds upon and follows so in order to potentially attack the network and you know you have one version of history and you convince everybody else to have a different version of history you basically have to take control of

a majority of the network for a sustained period of time. today as the network gets larger and larger that becomes almost impossible you're not going to get fifty to sixty percent of the network for a sustained period of time today without investing you know billions of dollars and not only just throwing money at the problem but you have to actually get your hands on the hardware there was a limit there was a period in the beginning of bitcoin i guess toshi whoever sotto she is. they were talking about occupy wall street at the time and the idea is well we don't really want to get too high profile at the moment because the network maybe is network to what's called a fifty one percent attack but that was out two years ago and the network has grown in size so that it's almost inconceivable to imagine a fifty one percent attack it's such an outlying risk it would be similar to saying well there's a risk that somebody might be able to synthesize gold out of garbage at a very very low cost sure that's possible if you have any even if even if you were to it to take over the network people would see it coming they would immediately

start selling their bickering so if you are in control of the network and suddenly you have a couple million that you managed to steal in for everybody but to be worth a lot less than you thought because the market will reprice that risk now to the network. like the bond bubble right now there's a huge number of bonds out there outstanding from sovereign wealth funds but sovereign governments they don't sell these bonds because. you know they would trigger a prisoner's dilemma they would all start selling simultaneously right over the fed this bad can't unwind it's bomb position because the market was see those sales coming and the bond market crash like they're front running it on the way up they would front runner on the way down so they really bought you can't flip a switch and take fifty one percent of the network right you would have without traffic to value the network right you know you'd have to build over time people would see it coming and the market would probably adjust other people that had hardware in reserve would turn it on to try to thwart an attacker that was starting to gain control of the network. filippi thanks so much for being on the kaiser report thank you max is fantastic and i suppose people could say that it's not so

much that bitcoin is digital gold it's more like gold is analog because anyway that's going to do it for this edition of the kaiser report with me max kaiser and stacy herbert i want to thank my guest tony gillespie of bit pay dot com if you like the same e-mail please do so at kaiser recorded r t t v dot ru until next time guys are saying. sick to multiply here. it's very profitable to invest in

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